ECONOMIC EVALUATION OF UNDERGROUND GOLD MINING WITH SUBLEVEL STOPING METHOD AT PT XYZ: COMPARISON OF DISCOUNTED CASH FLOW MODEL, MONTE CARLO SIMULATION, AND REAL OPTION ANALYSIS THROUGH BINOMIAL LATTICE AND BLACK-SCHOLES APPROACH

• Main Author: Putra, Jeffri
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/66528
• Institution: Institut Teknologi Bandung

To produce mining minerals requires big investment and limited by permits, reserves, and other uncertainties, so management must try to make the right investment decisions. In general, the economic analysis of a mining project is carried out using the Discounted Cash Flow (DCF) method which has a simple application. However, the analysis using this method does not consider the uncertainty factors that may occur in the future, and does not accommodate management uncertainty in making decisions. Therefore, additional analysis was carried out using Monte Carlo simulation and Real Option Analysis (ROA). The analysis begins by using the DCF method to calculate and Net Present Value (NPV) Internal Rate of Return (IRR) based on the cash flow model created. Next, a sensitivity analysis was carried out to see the impact of changes in input parameters on the NPV project and the parameters that most affected the project value. An analysis using Monte Carlo simulation was also carried out to see the probability distribution of each NPV value obtained from these investment projects so as to determine the scenario that is expected to occur. Furthermore, an analysis was carried out using the ROA method with the Binomial Lattice and Black-Scholes approach to determine the added value of the project. Analysis using the DCF method shows the project's NPV is $38,857,349 and an IRR of 17%, so it can be said that this mining project is economically feasible. The deterministic sensitivity analysis shows a significant change in the cash flow model with changes in commodity prices and operating costs originating from the money-excaling factor of the inflation rate. Based on the Monte Carlo simulation, the average NPV of the project is $-7,371,215 and $-3,389,337 using historical data on gold prices and inflation rates for the past 9 and 14 years. And based on the ROA method, there are pending options with premium options of $5,870,208 using historical data parameters for a 9 year period and a decision to start the project immediately in the absence of premium options using 14 years historical data parameters.