A1 Journal article (refereed), original research

Combining System Dynamic Modeling and the Datar-Mathews Method for Analyzing Metal Mine Investments


Open Access publication

Publication Details
Authors: Savolainen Jyrki, Collan Mikael, Luukka Pasi
Publication year: 2016
Language: English
Related Journal or Series Information: Acta Universitatis Palackianae Olomucensis, Facultas Rerum Naturalium, Mathematica
Volume number: 55
Issue number: 1
Start page: 95
End page: 110
Number of pages: 16
ISSN: 0231-9721
JUFO-Level of this publication: 1
Open Access: Open Access publication

Abstract
This paper presents how a dynamic system model can be used togetherwith the Datar{Mathews real option analysis method for investment analysisof metal mining projects. The focus of the paper is on analyzing aproject from the point of view of the project owner. The paper extendsthe Datar{Mathews real option analysis method by combining it with adynamic system model. The model employs a dynamic discount rate thatchanges as the debt-level of the project changes. A numerical case illustrationof a nickel mining project is presented. The results show thatusing dynamic system models in real option analysis is not only possiblewith the Datar{Mathews method, but also that some previously identi edproblems of real option valuation can be avoided.

Last updated on 2019-20-03 at 10:31