Research On Financing Decision-making In Mining Resources Exploitation Projects

Coal resources occupies an absolute dominant position in China’s energy structure. China is not only a large producer of coal resources but also a big Consuming country. According to the customs statistics, the demand of coal resources is much greater than the yield in our country, and the import has always been greater than the export. Besides according to the 2015 yearbook of world energy statistics by British Petroleum, our country’s reserve-production ratio of coal is only 30, which is far below the world average level. In the long run, it will not only impede the sustainable development of China’s economy, but also even menace the security of our energy. Therefore, speeding up to extend the international market of coal resources exploitation projects is not only the need of coal enterprises’ long-term development in our country, but also necessary for the strategy of maintaining China’s energy security. It has an important and practical significance.Along with the proposed “going out” strategy, more and more enterprises try to investment overseas coal resources exploitation projects. In 2004, Yankuang group succeeded in wholly acquiring Austar Coal Mine Pty Limited, which is the first overseas investment of coal resources exploitation practice in our country. Then Shenhua Group, China Coal, Kailuan group and other large state-owned coal enterprises are also starting to accelerate the expansion of overseas markets, but their development is unsatisfactory. Summarize the main reason for failure is that the mechanism is not sound in China and the financing channel is not smooth. The financing problem has become an important factor restricting the development of overseas coal resources exploitation projects.The exploitation projects of coal resources have the characteristics of large investment, high return and considerable risk, especially that transnational financing is in the face of very complex financial and legal environment. Single investor is difficult to get enough money and hard to bear the huge risk. In the process of project’s whole lifespan, the phased characteristics are obvious. Single investor is difficult to grasp the operational knowledge of whole process, which is not conducive to maximize the benefits of the projects. Therefore, reasonable ownership structure can not only solve the problem of money, but also can bring management and technological advances. But the process of project financing is a complex and dynamic process of decision which is involved in many decision problems and influenced by multiple factors. At present, it is imminent for our country to invest overseas coal resources exploitation projects, with lacking experience. Therefore, it is needed to make a comprehensive due diligence, establish a rational decision-making model, choose the perfect mode of financing, equity structure and fund structure, predict the volatility of the capital structure and make adjustments timely, in the early stage of a project.Our country is lack of systematic theoretical research for the financing decisions of the exploitation projects of coal resources; also foreign scholars in the field are rarely too. However, there are a variety of classic research methods in the field of finance and the fields of project finance of domestic general company, these researches established the foundation of investment in the coal exploration resources projects’ financing decision. But the quantitative analysis methods and the models that domestic and foreign scholars commonly used are very scattered, the depth of research is very limited, and has not formed a complete theoretical system yet. So this article starts from analyzing the feature of the project, sets up a multi-objective quantitative decision-making model to select financing mode, a multi-objective game model to select equity structure, a real option model, empirical analysis model and small sample time-series model to optimize capital structure in coal exploration resources projects’ financing decision. Through real case analyzing, verified the theoretical model has certain reference value for the coal resources exploration projects’ financing decisions. Specifically, the main research work and achievements of this paper are as follows:The first part: The selection of project’s financing mode that are based on the multi-objective quantitative decision-making model in coal resources exploration projects.Financing models distinguished by different stages are presented in this paper by analyzing the characteristics in stages coal resources exploration investment. Internal financing is generally adopted in the investigation phase, according to the characteristics of the project. The financing models should be put on the first place, because of complicated financing questions in the construction stage of the project. And recombinant or listing and financing are the main mode in the operation stage, with the repayment of the debt and the accumulation of capital.The factors that are influenced in selecting financing mode in the construction stage of the coal resources exploration projects have been analyzed. And there are 14 core influencing factors identified to act as the index for selection project financing mode. The characteristics of five kinds of mining project financing modes that commonly used in international(“Product payment”, “Leveraged lease”, BOT, ABS, PPP) have been analyzed. On this basis, expert group decision model is established in which the 14 central index weights are determined, based on ISM-ANP model. In the condition index weights were known, the mixed multi-targets gray target decision model are established which is used to selecting the project financing mode in the construction stage of coal resoures exploration projects.Firstly, the adjacency matrix of the explanation-structure model is set up according to the relationships between indexes. Through calculation, an index system of hierarchical structure level that the selection of financing mode with second floors were established and regarded as the calculative basis of the ANP model. Then, four experts were chosen to evaluat the weights of indexes of each layer, in the case of expert’s weight unknown, and the corresponding triangular fuzzy quantification was done. Through the calculation of the expert weight, gathered the experts’ assessment information. According to the calculation method of the ANP, the indexes weights were built in the constructive stage financing selection of coal resources exploration projects. Finally, according to characteristic of the 14 indexes, working out bull’s-eye drama of the quantitative indicators, intervals indicators and fixed nature(converting to the index of triangular fuzzy number), combining with the indexes weights, working out the various financing models’ evaluation sort in this paper. Through case calculations, ABS financing model is determined to be the optimal choice.The second part: The selection of Equity structure of coal resources exploration projects were based on the principal-agent theory.Capital demand at each stage of coal resources exploration projects is large, and need high technical requirements, so the professional task agents can provide services only through the relationship of the agency, and can as a shareholder play a dual role of principal and agent. That assumes that at each stage, there are two options, one is that there has only funds of equity investment in this stage, the other is that the main agent carry out it’s mission as an investment or add funds in exchange for the equity of projects. Based on the characteristics of the stages of projects’ cash flow, the ownership structure is divided into two categories to analyze. One is the outflow of cash, the agent implements the specific investment work of the projects under the authority of the project company, which is called the equity structure of investment period, the second is the inflow of cash, the agent implements the operation and management work of the projects under the authority of the project company, which is called the ownership structure of the operation period.(1) The election of the ownership structure in the investment period of coal resources exploration projects are based on the theory of multi-objective principal-agent. Three game models are established under the double-objective and double- incentive “time” and “quality” in this paper, based on the analysis of the characteristics of the investment. The three game models are: the principal-agent model that the agent has no equity and there is no cooperation, the game model that agent and project company cooperate together and the game model that agent has equity in it. Through the stimulative experiments of the case data, there are some conclusions as following:(1) In three game models, the project’s value-added, the value-added of project company and the value-added of contractor are all relate to the replacement rate of the marginal cost of effort about the duration and the quality which is named k.(2) In the model that agent holds shares, the shareholding ratio range can always be find when the k is within a certain range. The added values of three parties are better than that the agent is not sharing the equity in this range.(3) As the k increasing, the value-added is falling the model that contractor has equity in compareing with the model that contractor is not in. When k is over a certain range, there are higher value-added the model that contractor has no equity in than the model that contractor has equity.(2) The election of the ownership structure in the operation period of coal resources exploration projects are based on the principal-agent theory. With referencing to the methods in the project’s investment period, three corresponding game models are established in this paper. Through the stimulative experiments of the case data, there are some conclusions as following:(1) In these three kinds of game models, the value-added of project, financial investors and operations management providers are related to the output coefficient 3x.(2) Cooperation mode has the most advantages for the value-added of the projects, the key is whether the added value can be distributed reasonably. The value-added improvement in Non-cooperative game modle compareing with the model that operators has equity in is not obvious. The key lies in weather the proportion of total shares that the operators are able to exchange by investing is reasonable.(3) When the output coefficient 3x is constant, proportion of total shares interval can be determined that can be accepted by both the financial investors and operation management providers. As the output coefficient 3x increasing, the proportional interval is gradually moving to the left side of the real axis.The last part: Optimal capital structure dynamic selection of coal resources exploration projects in different stages.Optimal capital structure dynamic selection research is put forward in this paper, in investment phase and the operational phase, according to the characteristic of mine investment of the project program and its capital requirements features. The ABS financing model adopted in construction phase is a financing way that gets funds from selling the assets really. Therefore, the stripping assets of ABS will not bring tax benefit to the company, and will not increase the additional cost of company bankruptcy. Therefore, it can be viewed as the capital structure of the project investment period, including investigation phase and construction phase. The project financing in operational phase is closely related to the factors such as the policies of local government, laws and regulations, economic environment and so on. The optimal capital structure range in project’s operation stage can be drawn, in the same conditions, by studying the financial data of similar enterprises empirically which develop well.(1) The election of the capital structure in the investment stage of coal resources exploration projects are based on the B-S option pricing model. Calculation model of the tax benefit and bankruptcy cost are established in this paper, on the basis of B-S option pricing formula, and realized the calculation of making the enterprise value maximize by genetic algorithm(GA). In order to make further refinement of the capital structure, the portfolio optimization mode of similar funds is established which is based on the opportunity criteria, and realized the calculation of case model by using the genetic algorithm(GA).(2) The election of the capital structure in the operation stage of coal resources exploration projects are based on empirical research. The index system of the factors that influence capital structure is established in this paper, on the basis of researching numerous literatures which is related. An investigation of related financial data among the coal mine listed companies in Australia is conducted; empirical research and function fitting are conducted about relevant findings. The following conclusions can be drawn, combining the empirical research results of this paper: There are significant differences in the optimal capital structures of the listed companies that are under different operating conditions. There were huge differences and discrete distribution of assets and liabilities rate among Australian coal listing Corporations. There is a quadratic function relationship between the comprehensive value of the enterprise Z and asset liability ratio. The value of the enterprise is increased while the asset liability ratio goes up within a certain range; The value of the enterprise is decreased while the asset liability ratio beyond this range which presents inverted U shape between them. So the optimal capital structure interval is [48.72%, 60.08%] as shown in fitting function.(3) The funding structure prediction of coal resources exploration projects based on the small sample time series. The least squares support vector machine(LS-SVM) model was used to predict the capital structure of the project, and optimizing the key parameters of support vector machine(SVM) by using the particle swarm optimization(PSO) algorithm. Through case experiment, the predicted results and the actual dates are relatively close, forecasting results are satisfactory. The model can be used as a new method for predicting the capital structure of enterprise, which provides a method of forecast for financial strategy for the enterprises, and has a strong practical value.This dissertation is initial theoretical study of projects, the feasibility of model methods are verified, which has been proposed through analyzing the real case, and provides a reference for the coal resources exploration projects to development smoothly.