Evaluation Of Mining Enterprises' Value Based On Life Cycle Theory

As a basis tool in investment analysis and management, enterprise valuation improves management by analyzing and evaluating external environment, in order to grasp the prospect of future and maximize the market value of organization. The value of Mining companies comes mainly from exhaustible resources, which demands for grasping the own characteristics of mining companies, the reasonable valuation of mining companies lead to the sustainable development of mining business. Besides, it is also important in the corporate growth and strategic transformation. As resource-based enterprises, compared with other companies, the cash flow of mining companies in different development stages of its life cycle is different, while mining companies which depend on resources make it different from other types of companies, the service life of the mine depends on the amount of mine and the production capabilities of enterprise, resulting in the differences in income,discount rate and other economic indicators. Thus, the general enterprise valuation method is not suitable for assessing mining companies, the development stage of resource-based enterprises, mineral life, operating costs and capital expenditures should be considered in the valuation, establishing a specific valuation methods.Besides, there lacks of systematic research on this perspective of valuation.Based on the life cycle theory and the analysis of mining companies, firstly, this paper reviewed the current study about valuation theory, valuation of mining companies and life cycle theory, which helps establishing the direction of this study.Secondly, the traditional valuation method were introduced, as well as the assumption and applicability of these valuation methods were discussed, providing the methodological basis of choose the suitable method of mining companies. Thirdly,the specificity of mining companies and the uncertainty analysis in different stage of mining companies help finding the problems in mining companies, valuation. Basedon the analysis above, the paper discusses life cycle of mining enterprise, in order to identifying important factors that affect the various stages of the enterprise. Then establish the assessment model of mining companies based on its life cycle analysis.Due to the uncertainty and high risk of mining companies, real options method was introduced as a combined valuation model with DCF. Finally the valuation model is applied to the valuation of Antofagasta.