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Evaluating a small deposit next to an economically viable mine in West Africa from the points of view of the mining company, the government and the local community

Author

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  • Margaret Armstrong

    () (CERNA i3 - Centre d'économie industrielle i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)

  • Aziz Ndiaye

    (CERNA i3 - Centre d'économie industrielle i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper addresses the question of evaluating how much the different stakeholders stand to gain from a mining project. By carefully analysing the breakdown of the cash-flows generated, we were able to estimate the amounts received by the local community and by the national community (outside the mining area), the taxes and royalties received by the government and the profits made by the mining company. A real options framework was used to take account of the inherent uncertainty on the commodity price and the reserves, and the operating flexibility (that is, the possibility for the company to stop mining if the commodity price drops and/or the reserves prove to be lower than that had been envisaged). A synthetic case-study of a gold mine in West Africa was used to illustrate how this procedure could be applied in practice. By using the real option framework we were able to envisage scenarios for developing an extension to a deposit as a function of future values of the commodity price. The procedure proposed should provide governments and NGOs with more objective data for making policy decisions.

Suggested Citation

  • Margaret Armstrong & Aziz Ndiaye, 2013. "Evaluating a small deposit next to an economically viable mine in West Africa from the points of view of the mining company, the government and the local community," Post-Print hal-00869771, HAL.
  • Handle: RePEc:hal:journl:hal-00869771 Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00869771
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    References listed on IDEAS

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    1. Zhang, Qingyu & Weili, Tian & Yumei, Wei & Yingxu, Chen, 2007. "External costs from electricity generation of China up to 2030 in energy and abatement scenarios," Energy Policy, Elsevier, vol. 35(8), pages 4295-4304, August.
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    Cited by:

    1. Ming, Lei & Yang, Shenggang & Cheng, Cheng, 2016. "The double nature of the price of gold—A quantitative analysis based on Ensemble Empirical Mode Decomposition," Resources Policy, Elsevier, vol. 47(C), pages 125-131.

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