INVESTMENT PROJECT ANALYSIS THE CASE OF BINUNGAN BLOCK 10 MINE PROJECT
The Binungan Block 10 Mining Project is marginal from the previous economic valuation. Higher operational costs, land issues and low coal quality have become management's considerations for delaying operations. However, the demand for coal has increased significantly recently, which has driven...
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| Format: | Theses |
| Language: | Indonesia |
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| Online Access: | https://digilib.itb.ac.id/gdl/view/70753 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | The Binungan Block 10 Mining Project is marginal from the previous economic valuation. Higher operational costs, land issues and low coal quality have become management's considerations for delaying operations. However, the demand for coal has increased significantly recently, which has driven coal prices to historical highs. The management of PT Berau Coal considered accelerating the commencement of mining and asked the mine planner to carry out an Investment Project Analysis for the Binungan B 10 Mining Project.
To determine the economic valuation of investment projects, currently PT. Berau Coal uses a deterministic static model, whereas the Discounted Cash Flow model is based on the assumption that the variables used in the calculation are static. This final project examines 3 different mine plan options based on production schedule and duration, using the DCF approach. According to the calculation results, the highest NPV is generated by the base option, and the second alternative is the middle option, with a slightly lower NPV but better IRR and Payback Period. Assuming a coal price index of $30/t, the base option gives an NPV of $311.68 million, and the intermediate option, offers an NPV of $311.17 million. Considering the results, mine planning performs a probabilistic analysis using Monte Carlo simulation.
In the probabilistic method, 3 uncertainty variables (coal price, production rate, and mining costs) are simulated simultaneously through Monte Carlo Simulation for both production schedule options. The results show that the basic option still has a higher average NPV than the middle option. The average NPV for a basic option is $175 Million, and an intermediate option is $171 Million. Based on various analyzes that have been carried out, it is concluded that the investment in the Binungan B 10 project is feasible to follow up using the basic option, with a positive NPV probability (> 0) above 78%.
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