INVESTMENT PROJECT ANALYSIS PIT CACD BLOCK 8 , USING DISCOUNTED CASH FLOW (DCF) (CASE STUDY OF PT. BERAU COAL)
PT Berau Coal which is located in Berau Regency, East Kalimantan Province. Pit C2 Block 8 Binungan Mining Operation Area 2 PT Berau Coal is a coal mining operation area with multi-seam characteristics with a slope of coal seams at intervals of 40 – 60 degrees. The characteristics of coal deposits...
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| Format: | Theses |
| Language: | Indonesia |
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| Online Access: | https://digilib.itb.ac.id/gdl/view/71210 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | PT Berau Coal which is located in Berau Regency, East Kalimantan Province. Pit
C2 Block 8 Binungan Mining Operation Area 2 PT Berau Coal is a coal mining
operation area with multi-seam characteristics with a slope of coal seams at
intervals of 40 – 60 degrees. The characteristics of coal deposits are one of the
considerations in the formation of coal mining designs in collaboration with other
disciplines, including geotechnical, hydrology, safety and environment, as well as
other aspects. PT Berau Coal faces several challenges, risks and uncertainties such
as fluctuations in coal prices, production capacity, mining costs and related legal
aspects. Therefore, mining planning and strategy must be carried out carefully until
PT Berau Coal's mining permit expires in 2025.
We evaluate the financial aspects of Pit CACD's long-term mine planning using the
discounted cash flow (DCF) method with interest rates to calculate several
parameters, such as net present value (NPV), internal rate of return (IRR), and
profitability index (PI). The price of coal included in the calculation is deterministic
or the same over the life of the mining project. However, the DCF method assumes
that the risk of a project is a function of time, where the duration of the project is
parallel to the level of risk. The characteristics of the mining industry are different
where the risk level of mining projects tends to decrease as the project progresses
with the addition of technical data. In addition, the price parameter is the most
sensitive aspect of the project's economics. Therefore, the risks associated with
price fluctuations must be separated from the cash flow discount rate.
Financial assessment must accommodate the risks and uncertainties that exist to
overcome the weaknesses of the DCF method. The real options method serves as
an alternative for creating dynamic quantitative models for mining projects. In this
method, the discounted risk factor is applied directly to variables of uncertain
sources, such as coal prices, to improve accuracy. Therefore, evaluating long-term
mine planning at PT Berau Coal using scenario analysis and Monte Carlo
simulation is useful for making better decisions in production, investment and
resource allocation schemes.
With the results of a financial evaluation of NPV DCF 38mio USD, NPV Monte
Carlo 40mio USD, IRR 51%, PI 4.12, and PBP 2.28 years PT Berau Coal will consider and make a decision whether to continue the project considering several
risks or cancel the investment and not continue mining in Pit CACD.
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