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Determination of the effect of operating cost uncertainty on mining project evaluation

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  • Dehghani, Hesam
  • Ataee-pour, Majid
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    Abstract

    Mining projects are complex businesses that demand constant risk assessment. This is because several kinds of uncertainties influence the value of a mine project, typically. These uncertainties may be classified as exploration uncertainties, economic uncertainties and engineering uncertainties. The evaluation of a mine project under these uncertainties is a complicated job, which may lead to making a wrong decision by managers and stockholders. Therefore, at first, the engineers must recognize the mining uncertainties before carrying out the project evaluation. The economic uncertainties are the most important factors, which may affect the project evaluation. Among the mentioned uncertainties, the operating cost uncertainty is an important and effective factor, which is ignored to a certain extent.

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    Bibliographic Info

    Article provided by Elsevier in its journal Resources Policy.

    Volume (Year): 37 (2012)
    Issue (Month): 1 ()
    Pages: 109-117

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    Handle: RePEc:eee:jrpoli:v:37:y:2012:i:1:p:109-117

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    Web page: http://www.elsevier.com/locate/inca/30467

    Related research

    Keywords: Economic uncertainty; Metal price; Operating costs; Net present value; Binomial tree technique;

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    References

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    1. Moyen, Nathalie & Slade, Margaret & Uppal, Raman, 1996. "Valuing risk and flexibility : A comparison of methods," Resources Policy, Elsevier, vol. 22(1-2), pages 63-74.
    2. Kelly, Simone, 1998. "A Binomial Lattice Approach for Valuing a Mining Property IPO," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 2), pages 693-709.
    3. Alberto Moel, 2002. "When Are Real Options Exercised? An Empirical Study of Mine Closings," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 35-64, March.
    4. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
    5. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-57, April.
    6. Trigeorgis, Lenos, 1993. "The Nature of Option Interactions and the Valuation of Investments with Multiple Real Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(01), pages 1-20, March.
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    Cited by:
    1. Fan, Ying & Mo, Jian-Lei & Zhu, Lei, 2013. "Evaluating coal bed methane investment in China based on a real options model," Resources Policy, Elsevier, vol. 38(1), pages 50-59.
    2. Evatt, Geoffrey William & Soltan, Mousa Omid & Johnson, Paul V., 2012. "Mineral reserves under price uncertainty," Resources Policy, Elsevier, vol. 37(3), pages 340-345.
    3. Dehghani, Hesam & Ataee-pour, Majid & Esfahanipour, Akbar, 2014. "Evaluation of the mining projects under economic uncertainties using multidimensional binomial tree," Resources Policy, Elsevier, vol. 39(C), pages 124-133.

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