THE ECONOMIC EVALUATION OF THE UNDERGROUND GOLD MINING PROJECT SHRINKAGE STOPING IN PT XYZ USING THE REAL OPTIONS METHOD

• Main Author: Nuroktaviani, Dinda
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/54407
• Institution: Institut Teknologi Bandung

An investment is an activity to make a profit in the future. The company evaluates the project’s investment which is expected to provide sufficient leverage. There are several methods of investment valuation, one of which is the Discounted Cash Flow Method (DCF). The DCF method is the most widely used, but it has the drawback of assuming cashflow correctly, as it is very difficult to do because it is very risky. Therefore, there is a development on the DCF method, it is a real option. Real option is a method of project valuation that can include uncertainty and company investment strategies on existing projects. Real options split into some of the approaches. In this research, the approach used was Black-Scholes and Quadrinomial Lattice. The uncertainty that counts is the price of sale and inflation rate. The purpose of this research is to analyze investments in a mining project shrinkage stoping methods using DCF and Real options. The result of such analysis is that the project is abandoned if using the DCF method because of negative NPV value. In the meantime, when assessed with option value, the project should be delayed first, and run when the option value higher than keeping option value. There is a difference in value derived from both methods. Npv acquired at DCF by -$711,795.697, whereas with any real options of $4,606,400.53 (Quadrinomial Lattice) and $5,095,138.62 (Black-Scholes).