Derivative Mine Valuation: Strategic Investment Decisions in Competitive Markets
Successful management in competitive markets requires evaluation methods that respond to global market dynamics and provide investors with relevant information to make strategic investment decisions. These strategic decisions include decisions on investment timing, feasibility study and risk management and mine operating options. Conventional methods do not have the built-in capabilities to help investors handle these strategic issues. Advances in modern finance have had profound impacts on financial markets for options, futures and collaterized securities and offer appropriate tools in solving these problems. In this paper, the authors have extended the Brennan and Schwartz mineral resource model to develop the derivative mine valuation method based on the dynamic arbitrage theory. A copper mining venture has been evaluated using the derivative mine valuation and conventional methods. The results show that the derivative mine valuation method allows investors to maximize the venture's market value by exercising these strategic options. ©1998 Elsevier Science Ltd. All rights reserved.
S. Frimpong and J. M. Whiting, "Derivative Mine Valuation: Strategic Investment Decisions in Competitive Markets," Resources Policy, Elsevier, Jan 1997.
The definitive version is available at http://dx.doi.org/10.1016/S0301-4207(97)00029-9
Mining and Nuclear Engineering
Keywords and Phrases
Derivative Mine Valuation; Numerical Modelling; Strategic Options
Article - Journal
© 1997 Elsevier, All rights reserved.