Valuing uncertain asset cash flows when there are no options: A real options approach

Technological advance in gold mining at Uzhuralzoloto Group of Companies

“…Universities worldwide offer graduate-level training in real options, and most MBA programs devote one or two weeks of their corporate finance or investment courses to the topic of real options. Real options models of relevance to mining planning include optimizing exploration drilling programs (Cortazar, Schwartz, andCasassus 2003, Davis and, optimal mine development timing (Moel and Tufano 2000), optimal reserve and stockpile management (Samis, Davis, Laughton, and Poulin 2006), optimal production levels in single-stage (Cherian, Patel, and Khripko 2000) and two-stage (Cortazar and Casassus 2000) mining operations, the latter including stockpiling decisions, and optimal mine re-opening decisions (McCarthy and Monkhouse 2003). All of these papers, however, and others not mentioned here, treat the decision space as very sparse, with only one or two decisions needing to be made at each point in time in the face of only one or two sources of uncertainty.…”

Directions for future construction supply chain management research in New Zealand:A real options perspective

“…Essentially, RO works by adjusting for risk within the cash flow components while NPV discounts for risk at the aggregate net cash flow. This seemingly small difference allows RO to differentiate assets according to their unique risk characteristics, while the conventional NPV approach cannot (Samis, Davis, Laughton & Poulin, 2006;Samis, Davis & Laughton, 2007). Another advantage of RO over NPV is the way it handles discount rates: while NPV uses risk-adjusted discount rate, RO utilises a risk-free rate (or lending rate when risk-free rate is not available) to discount the cash flows in the evaluation of the project (Smith & McCardle, 1996;Walls, 2004;Martinez, 2009).…”

Selection of the open pit mining cut-off grade strategy under price uncertainty using a risk based multi-criteria ranking system / Wybór strategii określania warunku opłacalności wydobycia w kopalniach odkrywkowych w warunkach niepewności cen w oparciu o wielokryterialny system rankingowy z uwzględnieniem czynników ryzyka

“…Brennan and Schwartz (1985), were the first to apply the RO analysis in the mineral industry. Since then, RO analysis has been extended by valuing various types of managerial flexibilities inherent in the mineral industry using different valuation methods, (Mardones, 1993, Abdel Sabour & Poulin, 2006, Samis et al, 2006, Dimitrakopoulos & Abdel Sabour, 2007Topal, 2008, Cortazar et al, 2008Akbari et al, 2009, Gligoric et al, 2011.…”