INVESTMENT ANALYSIS OF GOLD MINING PROJECT (CASE STUDY OF PT XYZ)

• Main Author: Noerman, Iqbal
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/86987
• Institution: Institut Teknologi Bandung

Looking at global and domestic conditions, gold demand is expected to continue to increase, driven by the jewelry, investment, central bank, and technology sectors. Gold jewelry is the largest source of annual demand for gold by sector. India and China are by far the most prominent jewelry markets, together accounting for more than 50% of total global demand. The Asian and Middle Eastern markets are dominated by demand for purer and higher-carat gold. In addition, gold plays a significant role in global central bank reserves, and they are substantial holders of gold. The 2008 financial crisis prompted a fundamental change in central bank attitudes towards gold, prompting a reassessment of its role and relevance in reserve asset management. Central banks in emerging markets have increased their official gold purchases, while European banks have stopped selling, and the sector is now a significant source of annual gold demand. In the investment sector, investors of all types are beginning to accept gold as a reliable and tangible long-term store of value compared to other assets, while in the technology sector, the electrification trend is supporting gold demand in this sector, with most types of semiconductor chips using the metal either as a coating or in the form of thin wires. PT XZY is one of the gold mining companies in Indonesia that plans to carry out mining activities in 2025. PT XYZ has the potential to take advantage of this demand opportunity with large gold reserves until 2033. Still, investment in the mining industry is a risky business compared to other industries because of the many uncertainties, and economic uncertainty, such as gold price fluctuations, is the most significant source of uncertainty that impacts project assessments and investment decisions. Therefore, PT XYZ must carefully manage and analyze these risks and uncertainties before carrying out mining activities to ensure that the investment is economically feasible. This study aims to analyze the financial feasibility of the PT XYZ gold mining project using the Capital Budgeting Analysis method with the Discounted Cash Flow (DCF) technique. In addition, risk analysis is carried out through Sensitivity Analysis, Scenario Analysis, and Monte Carlo Simulation to measure uncertainty and its impact on the project's financial feasibility. The results of the study indicate that the implementation of the project will generate a positive Net Present Value (NPV) of USD 289,525,715 an Internal Rate of Return (IRR) of 40.63% which is greater than the Weighted Average Cost of Capital (WACC) of 7.12%, Payback Period (PBP) for 4.14 years, Discounted Payback Period (DPBP) for 4.38 years which is shorter than the project life, and Profitability Index (PI) of 6.75 which indicates a good and attractive investment. The results of the Sensitivity Analysis identified that gold prices and gold production are the two variables that most influence changes in the project's NPV, where a change in the variable + 20% will result in a change in NPV of + 61.96% for gold prices and + 61.82 for gold production. Scenario Analysis reveals that in the best-case scenario, the project NPV can increase to USD 812,917,919, while in the worst-case scenario, the project NPV can decrease to USD -39,990,448. Monte Carlo Simulation shows a 92.24% probability of achieving a positive NPV, indicating a high chance of project success, a 7.76% probability of experiencing a negative NPV, indicating an acceptable level of project risk, and a probability of NPV > average of 50.34% indicating that the project has a relatively balanced chance of generating economic value more significant than average expectations. The analysis results show that the project implementation is financially feasible, so PT XYZ is recommended to carry out this gold mining project.