ECONOMIC EVALUATION OF OPEN PIT COAL MINING PRODUCTION IMPROVEMENT SCHEME USING DISCOUNTED CASH FLOW AND REAL OPTION VALUATION METHODS IN PT XYZ

• Main Author: Ramadinata Yantoro, William
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/56486
• Institution: Institut Teknologi Bandung

The mining industry is a capital-intensive industry and carries a high risk. So it is necessary to conduct an economic evaluation to measure the economic feasibility of the project. Generally, the economic evaluation technique used in the mining industry is the Discounted Cash Flow (DCF) approach. However, the characteristics of a mining project are that it consists of many uncertainty factors. While in the DCF method, there are a lot of uncertainty variables that are not calculated and considered to have no risk. Therefore, in this study, seeks to conduct an economic analysis by taking the management flexibility options in dealing with the uncertainty factor. The method that will be used is the Real Option Valuation (ROV) method. The economic evaluation carried out on coal mines using the open pit method at PT XYZ was carried out using the DCF method to determine economic indicators for the DCF method. Furthermore, an economic evaluation will be carried out using the ROV method through the binomial lattice approach. The results showed that the DCF method obtained NPV $ 283.799.271,19 for scenario 1, $ 692.253.640,24 for scenario 2 and $ 385.574.478,92 for scenario 3. For the IRR value for scenario 1, it was 29 %, 50% for scenario 2 and 32% for scenario 3. Using the ROV method, the option value is $ 2.103.163.381 for scenario 1, $ 3.211.360.576 for scenario 2 and $ 2.412.660.134 for scenario 3. The option premium is $ 1.819.364.110 for scenario 1, for $ 2.519.106.936 for scenario 2 and for $ 2.027.085.655 for scenario 3. In addition, the results of the study also show that the greater the production capacity, the better the results of economic feasibility.