STUDY OF THE IMPACT OF INTERNAL AND EXTERNAL UNCERTAINTIES ON RESERVE VALUE IN COAL MINING PROJECT DEVELOPMENT USING LONGWALL METHOD

• Main Author: Fathur Hidayattullah, Mochamad
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/80474
• Institution: Institut Teknologi Bandung

Underground coal mining using the longwall method employs mechanical protective walls for continuous coal extraction, thereby increasing the project's risk. The economic evaluation method for this project is the discounted cash flow (DCF) method; however, this method does not yet incorporate management flexibility. Therefore, real option valuation (ROV) is used with standard binomial lattice and learning options approaches. The economic evaluation begins with the DCF method, producing various economic feasibility parameters such as Net Present Value (NPV) and Internal Rate of Return (IRR). Subsequently, a sensitivity analysis is conducted to identify the most sensitive parameters. The evaluation then uses ROV with standard binomial lattice, learning options, and rainbow options to determine the project's added value. The DCF method results in an NPV of $65,385,660 and an IRR of 28.59%. Sensitivity analysis reveals that the coal selling price is the most sensitive parameter affecting the project's value. Based on 10-year and 15-year historical data, option premiums of $22,241,326 and $48,385,000 are generated using standard binomial lattice, $35,529,652 and $51,368,986 using learning options. It is found that external factors' uncertainty has a greater impact on the company's asset value compared to internal factors, and with coal thickness internal uncertainties being more influential than coal quality on the company's asset value.