On Option Game In The Timing Of Mining Investment

The optimal investment decision of mining project can not only improve theeffective utilization of mineral resources, but raise the efficiency of paid use ofmineral resources exploration rights and transfer. And it is of great guidingsignificance to the sustainable development of mines. Mining investment decisionsare affected by many uncertain factors. Traditional investment methods, for instance,NPV can’t accurately assess the value of uncertainty when the investment projectshave flexibility and strategy growth. Therefore, option game theory came into beingto have mining enterprises investment timing strategies achieved effectively. And ithas momentous theoretical significance and application prospect for solving theflexible management of mining investment decisions.Firstly, this article employs option game approach on the basis of the domestic andforeign researches. The option game theory exactly compensate for the lack of NPVin the analysis of mining project investment strategy. However, the real option theoryrequires a combination of game theory to address the impact of competitive factors onstrategy because of the market competition. Then, option game theoretical frameworkcomes into being to have mining project investment strategy developed moreappropriately.Secondly, mining investment analyses based on option game theory are performed.The analysis indicates that mining investment projects have characteristics of realoption. And competition for mineral resources brings about resource value erosion.The thoughts are to determine the value function of investment projects, to confirmoptimal investment threshold and the expected first hitting time, to form a balancedinvestment strategy under uncertainty and competitive environment.Then, carry out an analysis of two-oligopoly mine option game model underuncertainty and competitive environment. The value function of the potential roles, the derivation of optimal investment threshold and balanced investment strategiesunder different circumstances are given in this section. The multi-oligopoly miningmodel is finally built in this paper on the base of two-oligopoly mining option gamemodel by proposing the hypothesis of the model and confirming the value of miningenterprises and analyzing equilibrium conditions and equilibrium strategy.Ultimately, carry out an analysis of investment decisions based on option game bytaking the case of uranium mines. The benign development of uranium industry is ofgreat importance. And it occupies the important position in our national economy andin the safe of national defense security. There is a need to combine with thecharacteristics of uranium resources and resource prices to analyze the uraniummining investment projects decisions systematically and scientifically. Applied to acase of three uranium mines, this model determines the expected first hitting time andvalidates that it is an effective investment decision-making method. And it providesan important reference value for uranium mines and other resource enterprises’investment decision.