ECONOMIC EVALUATION OF OPEN CAST NICKEL LATERITE MINE IN PT XYZ: MODEL COMPARISON BETWEEN DISCOUNTED CASH FLOW, MONTE CARLO SIMULATION, AND REAL OPTION VALUATION
Investment on mining industry is one of the most high-risk investments that must be analyzed in order to get proper decision for the investment. In general, the economic feasibility analysis of a mining project is carried out by using Discounted Cash Flow (DCF) method, which is relatively simple...
Saved in:
| Main Author: | |
|---|---|
| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/51621 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Investment on mining industry is one of the most high-risk investments that must be
analyzed in order to get proper decision for the investment. In general, the economic
feasibility analysis of a mining project is carried out by using Discounted Cash Flow
(DCF) method, which is relatively simple when implemented. However, DCF method has
disadvantages which not considering uncertainty factors that may arise in the future and
does not accommodate the management flexibility in the decision making. Therefore, Real
Option Valuation (ROV) and Monte Carlo Simulation is needed.
Economic feasibility analysis started by using DCF method to determine Internal Rate of
Return (IRR) and Net Present Value (NPV) by the input of cash flow model which have
been created. After that, sensitivity analysis will be carried out, which divided into
deterministic sensitivity analysis in showing the impact on the project NPV by the changes
of the sensitivity parameters and determining the most impactful sensitivity parameter, and
probabilistic sensitivity analysis with Monte Carlo simulation in order to estimate the
possibility of every NPV that might be obtained from the project investment. The next
step is analysis by using Binomial Lattice ROV method to determine the added value of
the project.
Economic feasibility analysis using the DCF method shows the project NPV of $
15.203.967 and IRR of 20,81% so it can be concluded that this mining project is
economically feasible. Deterministic sensitivity analysis shows a significant impact on the
cash flow model as the changes of commodity price. Based on the Monte Carlo
simulation, the average value of the project NPV is $ 75.989.531, by using the nickel
selling price historical data for the past 14 years. And based on the ROV method, there is
an option to delay this project for 1 year with the option value of $ 29.903.467.
|
|---|