Optimisation with options
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We provide a valuation framework for mining projects incorporating options to vary mining, processing and stockpiling rates, options to alter processing and stockpiling cutoff grades, options to expand mining and processing capacities and the option to abandon. Each of these real operating options is exercisable in response to price variability for the mineral being mined. With a case study application, we demonstrate that project optimisation with recognition of real options (versus without) entails: increased project value, as expected; and, at project outset, prescription of lower processing capacity (with lower associated capital expenditure), higher processing cutoff grade and greater use of stockpiles.
Copyright © 2011 Institute of Materials, Minerals and Mining
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