Adjusted real option valuation to maximise mining project value - A case study using century mine

S. Shafiee, E. Topal, M. Nehring

Research output: Chapter in Book/Report/Conference proceedingConference contribution

10 Citations (Scopus)

Abstract

Nowadays mining projects are seeking new versions of evaluation that are based on the flexibility in the project. Real option valuation (ROV) is one of the modern evaluation methods that provides a tool to adapt and revise mining projects under uncertainty and future variable movements. Most evaluation approaches simply assume that some variables are fixed, such as production rate, variable cost, fixed cost and lifetime of project. The first section of this paper reviews a comprehensive study of ROV in mining projects. The paper then introduces a new model that solves problems where previous methods lacked. The new method endeavours to find maximum mining project value by adding total cost as a function of production rate into ROV. The second section has been applied to a new model on the Century zinc mine in north-west Queensland, thus illustrating the future overview of that mine. The new version of ROV gave a significant positive value for the Century Mine, when the closure and reopening options where available throughout the life of the mine. Consequently, the new method evaluates real options to add value to mining projects, maximising project's value, estimating cost function, optimising production rates and offers opportunities in projects to amplify gains or to mitigate losses.

Original languageEnglish
Title of host publicationProject Evaluation Conference 2009
Pages125-134
Number of pages10
Edition3
Publication statusPublished - 2009
Externally publishedYes
EventProject Evaluation Conference 2009 - Melbourne, VIC, Australia
Duration: Apr 21 2009Apr 22 2009

Other

OtherProject Evaluation Conference 2009
CountryAustralia
CityMelbourne, VIC
Period4/21/094/22/09

Fingerprint

valuation
Zinc mines
Costs
cost
Cost functions
project
zinc

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering
  • Geotechnical Engineering and Engineering Geology

Cite this

Shafiee, S., Topal, E., & Nehring, M. (2009). Adjusted real option valuation to maximise mining project value - A case study using century mine. In Project Evaluation Conference 2009 (3 ed., pp. 125-134)

Adjusted real option valuation to maximise mining project value - A case study using century mine. / Shafiee, S.; Topal, E.; Nehring, M.

Project Evaluation Conference 2009. 3. ed. 2009. p. 125-134.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Shafiee, S, Topal, E & Nehring, M 2009, Adjusted real option valuation to maximise mining project value - A case study using century mine. in Project Evaluation Conference 2009. 3 edn, pp. 125-134, Project Evaluation Conference 2009, Melbourne, VIC, Australia, 4/21/09.
Shafiee S, Topal E, Nehring M. Adjusted real option valuation to maximise mining project value - A case study using century mine. In Project Evaluation Conference 2009. 3 ed. 2009. p. 125-134
Shafiee, S. ; Topal, E. ; Nehring, M. / Adjusted real option valuation to maximise mining project value - A case study using century mine. Project Evaluation Conference 2009. 3. ed. 2009. pp. 125-134
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