Tokenization of Mining Assets from the Source: Demystifying Criticism

Pablo Rutigliano defends the viability and rationality of tokenizing mining projects from their very inception, dismantling the arguments of those who consider it unfeasible

The tokenization of mining assets, particularly in its earliest or “embryonic” phase, is a topic that generates intense debate and, according to Pablo Rutigliano, founder of Atómico 3, also a great deal of misunderstanding and unfounded criticism from certain technical and governmental sectors.

Rutigliano, firmly grounded in accounting and economic principles, defends the viability and rationality of tokenizing mining projects from their very inception, dismantling the arguments of those who consider it unfeasible.

The cornerstone of Rutigliano's argument lies in the accounting treatment of the initial expenses of a mining project. He clearly explains that “When you tokenize a mining asset from the outset, the mining company has to transfer all those expenses it incurs, or spends, or invests, to a place within the financial statements, within the assets, which is precisely the activation of that resource.” This accounting capitalization process is not an invention, but a standardized and universal practice.

“Let's keep in mind that if that resource has a capitalization of one million, or two million, or one hundred thousand dollars, the asset is clearly incorporated under local and international accounting standards.” Therefore, he categorically states that “the claims made by geologists that it cannot be tokenized from the embryonic stage [are meaningless] when one has an incorporation in an asset, and it is reflected in the financial statements, and the financial statements are audited with the corresponding audit reports.” An asset that is capitalized and audited is an indisputable part of the company's equity and has economic value.

Rutigliano directly challenges those who deny economic value at this initial stage:

“How can they say that there is no economic value in an initial movement when there is a process of expenses, searches, studies, evaluations, and everything else that will be incurred in an investment plan, which is so important in order to move on to the certification stage...?”

He emphasizes that all this exploratory work and preliminary studies, essential for reaching the proven reserves phase and a clear mining inventory, “will be activated in the initial stage.”

This accounting activation is mandatory and objective. “Therefore, no one can say, and no one can object, that in the financial statements, all of this work that is being done in a development plan for embryonic mining must be included or activated.” He considers the position of those who demand that tokenization be based solely on the proven reserves certificate (such as 43-101 in certain jurisdictions) to be a fundamental error: “They are wrong to say that tokenization has to be based on 43101. No.”

Why tokenize from the outset?

The reason for tokenizing from the outset, according to Rutigliano, is strategic and generates vital momentum for the project. “Because a large part of activating a growth process in tokenization and generating the next step, which is the proven reserve, will have a much stronger impact.”

The financing obtained through the initial tokenization allows precisely the financing of the work necessary to arrive at that definitive technical report that determines the proven and inventoried reserves, which, in turn, will also be reflected in the accounts. Transparency and auditing are key in this model:

“The importance is that the company being tokenized reports clearly and responsibly and audits third parties and agencies on everything that represents its asset, its mining asset.”

Rutigliano clarifies a crucial point about the nature of the backing in the Atómico 3 model, distancing himself from the idea that the token directly represents a reserve certificate. “The other misconception they talk about regarding Atómico's backing... Atómico's backing is the traceability of the embryonic model from point A to point B and from point B to the point of production.”

In other words, the fundamental value lies in the “economic traceability generated by everything the project represents, from its origin to the production commitment, as appropriate in all its phases.” The tokens represent this comprehensive traceability of the economic value generated and documented at each stage of mining development.

“That traceability and the use of those tokens generate the resulting net... which is the economic whole represented, valued, and responding to established standards... based on the transparency of the economy,” says the founder of Atómico 3.

Comparisons with real estate tokenization

He harshly attacks the simplistic comparison with real estate tokenization, pointing out a serious misinterpretation on the part of critics. “The mistake that officials... and geologists, as well as some engineers, are making is clearly not formally interpreting the traceability of the economy with respect to the Atomic 3 token link,” explains the executive. He elaborates:

“A real estate asset has nothing to do with a mining asset, completely.”

The radical difference lies in the “probability vector” inherent in mining in its initial phase. “Because there is mainly a vector that is precisely a measure of probabilities, measurable and in turn also of information, such as the initial study that is carried out in order to certify a mining reserve,” concludes Rutigliano.

While in a real estate project the costs and the final result are known from the outset, “in mining, this is not yet known because the exploration, prospecting, and analysis process is needed to determine or quantify exactly what the reserve asset is.” This initial uncertainty, mitigated by the accounting activation of exploration expenses and studies, is precisely what tokenization seeks to finance from the outset in order to reduce risk and move forward.

Rutigliano concludes with a scathing criticism of the opposition based on what he considers ignorance of basic accounting principles:

“The nonsense spoken by the mining sectors that it is not possible to tokenize from the embryonic stage is incredible because in that case they should not include part of those expenses and activate them.”

He states that “Any auditor or any professional in the economic field would blush at what some engineers and geologists are saying.” His final call is clear and forceful, appealing to popular wisdom: “As the saying goes, cobbler, stick to your last, let them express concretely the transparency of what tokenized mining represents.”

For Rutigliano, mining tokenization from the outset, backed by the economic traceability of capitalized expenses and project development, is not only viable but also a rational, transparent, and necessary model that requires a debate based on solid technical and accounting fundamentals, not on prejudice or misunderstanding.