ECONOMIC EVALUATION OF PRIMER TIN MINING WITH AND WITHOUT BYPRODUCT UTILIZATION IN ULTIMATE PIT LIMIT SCENARIO AT PT XYZ WITH THE REAL OPTIONS METHOD

• Main Author: Kusuma Wardani, Indah
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/77151
• Institution: Institut Teknologi Bandung

Tin mining, followed by the utilization of processing by-products (SHP), requires additional investments, leading to increased capital and operational costs. Therefore, a more comprehensive economic evaluation approach is necessary to assess the feasibility of the business expansion. The conventional economic evaluation using the Discounted Cash Flow (DCF) method is insufficient to address potential uncertainties that may arise in the future. Thus, the Real Options Binomial Lattice approach is applied to accommodate management flexibility in decisionmaking. The analysis focuses on two UPL scenarios: scenario 1 (LOM 24 years) and scenario 2 (LOM 26 years) with the aim of simulating the best scenario that evaluates the value of both tin and quartz sand. The feasibility analysis using the DCF method shows that all project scenarios, whether mining tin alone or mining tin + SHP, are economically viable. The largest deterministic Net Present Value (NPV) and Internal Rate of Return (IRR) are obtained from scenario 1, which involves mining tin + SHP. Deterministic sensitivity analysis indicates significant changes in the cash flow model due to fluctuations in commodity prices. Without considering historical quartz sand prices in asset value volatility, scenario 1 shows an increase in option premium after utilizing SHP. However, when historical quartz sand prices are included with an assumed price increase of 5-7% per year, scenario 1 exhibits a larger increase in option premium after utilizing SHP compared to not incorporating historical quartz sand prices. This implies that scenario 1 is more advantageous when the company intends to expand its business.